Senators push for oil export deal with Mexico

By Jennifer A. Dlouhy | Houston Chronicle

Published 7:02 am, Monday, February 23, 2015

Photo: Dario Lopez-Mills

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Oil workers set the drill on the Centenario deep-water drilling platform off the coast of Veracruz, Mexico in the Gulf of Mexico, Friday, Nov. 22, 2013. The administration of Mexico's President Enrique Pena Nieto is pushing for an energy reform that will increase private investment in state-owned oil company Pemex and Mexico’s oil industry as traditional “easy oil” reserves dry up, forcing the country to explore deep water and shale oil that are more expensive and complicated to extract. (AP Photo/Dario Lopez-Mills) less

Oil workers set the drill on the Centenario deep-water drilling platform off the coast of Veracruz, Mexico in the Gulf of Mexico, Friday, Nov. 22, 2013. The administration of Mexico's President Enrique Pena ... more

Photo: Dario Lopez-Mills

Senators push for oil export deal with Mexico

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WASHINGTON — Twenty-one senators last week urged the Obama administration to swiftly authorize an exchange of heavy Mexican crude with light U.S. oil.

At issue is a Pemex affiliate’s request to export 100,000 barrels per day of light U.S. oil and condensates in exchange for heavy Mexican crude — a transaction that can be approved by U.S. regulators on a case-by-case basis under existing trade laws.

“We encourage the Department of Commerce to approve any such applications it has received or may receive from adjacent foreign states such as Mexico,” the senators said in a letter to Commerce Secretary Penny Pritzker. “These potential transactions are in the national interest and, if applied for, should be authorized without delay.”

But the letter, spearheaded by Sens. Lisa Murkowski, R-Alaska, and Heidi Heitkamp, D-N.D., goes beyond championing a possible exchange of U.S. and Mexican crude to endorse a broader affirmation that oil exports to Mexico are in the national interest.

Former President Ronald Reagan issued a similar finding for oil exports to Canada in 1985, and it has remained one of the exceptions to the United States’ ban on exporting crude.

“We believe it would be appropriate to further liberalize energy trading with Mexico,” the senators said. “We encourage the current administration to follow President Reagan’s example by issuing a similar finding that United States oil exports to Mexico — for consumption in Mexico — are in the national interest.”

The letter suggests a baseline of 21 senators who support easing trade restrictions on crude. And while many of the letter’s signers — including Texas Republicans John Cornyn and Ted Cruz — come from states with significant oil production, other states also are represented in the mix. Heitkamp was the only Democrat on the missive.

There are many logistical and market challenges to a U.S.-Mexico oil exchange. The Columbia University’s Center on Global Energy Policy highlighted some of the obstacles in an paper earlier this month.

One of the biggest challenges is financial. Analysts say exchanges of Eagle Ford crude for Mexican Maya crude make the most sense when there is a relatively wide spread between international Brent oil and domestic West Texas Intermediate. The two benchmark crudes were at parity last month, though the spread has widened again in recent weeks.

Exchanges with adjacent countries would require importing the equivalent quantity of Mexican crude oil — though additional volumes or capital can make up for differences in the crude qualities. Any U.S. crude oil sent to Mexico under an exchange would have to be consumed or refined in the country. And the volume of Mexican crude shipped to the United States under the deal would have to go beyond existing contracts, essentially coming on top of already committed U.S. purchases of Mexican oil.